Turkey imposed a controversial tax on wealth to finance the army in 1942. This tax was arbitrarily assessed and fell disproportionately on non-Muslim minorities. We study the heterogeneous impact of this tax on firms by assembling a new dataset of all enterprises in Istanbul between 1926 and 1950. We find that the tax led to the liquidation of non-Muslim-owned firms, which were older and more productive, reduced the formation of new businesses with non-Muslim owners, and replaced them with frailer Muslim-owned startups. The tax helped “nationalize” the Turkish economy, but had negative implications for productivity and growth.

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The Wealth Tax of 1942 and the Disappearance of Non-Muslim Enterprises in Turkey

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The Wealth Tax of 1942 and the Disappearance of Non-Muslim Enterprises in Turkey

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This article is supported by the European Commission under the Marie Curie Grant 2013ABH67840006 and the National Science Foundation under the grant NSF SES 1559273. We thank Ayhan Aktar, Dan Bogart, Amanda Gregg, Timothy Guinnane, Philip Hoffman, Kıvanç Karaman, Timur Kuran, Şevket Pamuk, Jean-Laurent Rosenthal, and Ali Cevat Taşıran for helpful comments and suggestions. We also thank Atacan Atakan, Burcu Belli, Semih Göktalay, and Ece Özçeri for excellent research assistance. This article was also circulated under the title “Political Economy, Firm Survival and Entrepreneurship: The Case of the Wealth Tax (1942).”

Footnotes

This article is supported by the European Commission under the Marie Curie Grant 2013ABH67840006 and the National Science Foundation under the grant NSF SES 1559273. We thank Ayhan Aktar, Dan Bogart, Amanda Gregg, Timothy Guinnane, Philip Hoffman, Kıvanç Karaman, Timur Kuran, Şevket Pamuk, Jean-Laurent Rosenthal, and Ali Cevat Taşıran for helpful comments and suggestions. We also thank Atacan Atakan, Burcu Belli, Semih Göktalay, and Ece Özçeri for excellent research assistance. This article was also circulated under the title “Political Economy, Firm Survival and Entrepreneurship: The Case of the Wealth Tax (1942).”

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